Loans

6 Months Ended

Jun. 30, 2011

Loans [Abstract]

LOANS

NOTE 3 — LOANS

The following table presents the recorded investment in loans by portfolio segment. The recorded investment in loans includes the principal balance outstanding, adjusted for purchase premiums and discounts, deferred loan fees and costs and includes accrued interest.

	June 30,			December 31,
	2011			2010
Commercial	$	33,027		$	38,194
Real estate:
Single-family residential		21,481			23,273
Multi-family residential		32,541			35,308
Commercial		75,028			80,725
Construction		—			4,919
Consumer:
Home equity lines of credit		16,072			16,316
Other		1,383			1,790
Subtotal		179,532			200,525
Less: Allowance for loan losses (ALLL)		(8,050	)		(9,758	)
Loans, net	$	171,482		$	190,767

Construction loans consisted of $2,324 in single-family residential loans and $2,595 in commercial real estate loans at December 31, 2010. There were no construction loans at June 30, 2011.

The ALLL is a valuation allowance for probable incurred credit losses in the loan portfolio based on management’s evaluation of various factors including past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. A provision for loan losses is charged to operations based on management’s periodic evaluation of these and other pertinent factors described in Note 1 of the Notes to Consolidated Financial Statements contained in the Company’s 2010 Annual Report that was filed as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2010.

The following tables present the activity in the ALLL by portfolio segment for the three and six months ended June 30, 2011:

	Three months ended June 30, 2011
				Real Estate												Consumer
																Home
																equity lines
	Commercial			Single-family			Multi-family			Commercial			Construction			of credit		Other			Total
Beginning balance	$	3,141		$	233		$	1,939		$	3,848		$	34		$	201	$	21		$	9,417
Provision for loan losses		240			14			693			(488	)		(34	)		16		(9	)		432
Charge-offs		(640	)		(7	)		(450	)		(850	)		—			—		—			(1,947	)
Recoveries		—			2			1			122			—			3		7			135
Reclass of ALLL on loan-related commitments (1)		13			—			—			—			—			—		—			13
Ending balance	$	2,754		$	242		$	2,183		$	2,632		$	—		$	220	$	19		$	8,050

⁽¹⁾ Reclassified from (to) accrued interest payable and other liabilities in the consolidated balance sheet.

	Six months ended June 30, 2011
				Real Estate												Consumer
																Home
																equity lines
	Commercial			Single-family			Multi-family			Commercial			Construction			of credit			Other			Total
Beginning balance	$	1,879		$	241		$	2,520		$	4,719		$	74		$	303		$	22		$	9,758
Provision for loan losses		1,945			11			911			(860	)		(74	)		(88	)		6			1,851
Charge-offs		(1,140	)		(14	)		(1,250	)		(1,350	)		—			—			(18	)		(3,772	)
Recoveries		71			4			2			123			—			5			9			214
Reclass of ALLL on loan-related commitments (1)		(1	)		—			—			—			—			—			—			(1	)
Ending balance	$	2,754		$	242		$	2,183		$	2,632		$	—		$	220		$	19		$	8,050

⁽¹⁾ Reclassified from (to) accrued interest payable and other liabilities in the consolidated balance sheet.

Activity in the ALLL for the three and six months ended June 30, 2010 was as follows:

	Three months ended			Six months ended
	June 30,			June 30,
	2010			2010
Beginning balance	$	7,396		$	7,090
Provision for loan losses		5,938			6,686
Charge-offs		(3,290	)		(3,813	)
Recoveries		18			111
Reclass of ALLL on loan-related commitments (1)		12			—
Ending balance	$	10,074		$	10,074

(1) Reclassified from (to) accrued interest payable and other liabilities in the consolidated balance sheet.

The following table presents the balance in the ALLL and the recorded investment in loans by portfolio segment and based on the impairment method as of June 30, 2011:

			Real Estate								Consumer
											Home
											equity lines
	Commercial		Single-family		Multi-family		Commercial		Construction		of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	189	$	—	$	782	$	369	$	—	$	—	$	—	$	1,340
Collectively evaluated for impairment		2,565		242		1,401		2,263		—		220		19		6,710
Total ending allowance balance	$	2,754	$	242	$	2,183	$	2,632	$	—	$	220	$	19	$	8,050
Loans:
Individually evaluated for impairment	$	722	$	—	$	3,070	$	2,864	$	—	$	135	$	—	$	6,791
Collectively evaluated for impairment		32,305		21,481		29,471		72,164		—		15,937		1,383		172,741
Total ending loan balance	$	33,027	$	21,481	$	32,541	$	75,028	$	—	$	16,072	$	1,383	$	179,532

The following table presents the balance in the ALLL and the recorded investment in loans by portfolio segment and based on the impairment method as of December 31, 2010:

			Real Estate								Consumer
											Home
											equity lines
	Commercial		Single-family		Multi-family		Commercial		Construction		of credit		Other		Total
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	332	$	—	$	1,296	$	1,276	$	—	$	—	$	—	$	2,904
Collectively evaluated for impairment		1,547		241		1,224		3,443		74		303		22		6,854
Total ending allowance balance	$	1,879	$	241	$	2,520	$	4,719	$	74	$	303	$	22	$	9,758
Loans:
Individually evaluated for impairment	$	2,223	$	142	$	3,985	$	4,250	$	—	$	138	$	—	$	10,738
Collectively evaluated for impairment		35,971		23,131		31,323		76,475		4,919		16,178		1,790		189,787
Total ending loan balance	$	38,194	$	23,273	$	35,308	$	80,725	$	4,919	$	16,316	$	1,790	$	200,525

The following table presents loans individually evaluated for impairment by class of loans at June 30, 2011. The unpaid principal balance is the contractual principal balance outstanding. The recorded investment is the unpaid principal balance adjusted for partial charge-offs, purchase premiums and discounts, deferred loan fees and costs and includes accrued interest. There was no cash-basis interest income recognized during the three and six months ended June 30, 2011.

	As of June 30, 2011						Three months ended June 30, 2011				Six months ended June 30,2011
	Unpaid Principal		Recorded		ALLL		Average Recorded		Interest Income		Average Recorded		Interest Income
	Balance		Investment		Allocated		Investment		Recognized		Investment		Recognized
With no related allowance recorded:
Commercial	$	285	$	235	$	—	$	154	$	—	$	149	$	—
Real estate:
Single-family residential		—		—		—		—		—		47		—
Commercial:
Non-owner occupied		75		75		—		75		—		76		—
Land		804		688		—		686		11		690		21
Consumer:
Home equity lines of credit:
Originated for portfolio		135		135		—		136		—		136		—
Total with no allowance recorded		1,299		1,133		—		1,051		11		1,098		21
With an allowance recorded:
Commercial		1,777		487		189		1,112		—		1,487		—
Real estate:
Multi-family residential		4,320		3,070		782		3,147		—		3,433		—
Commercial:
Non-owner occupied		2,507		1,050		80		1,623		—		1,938		—
Owner occupied		1,051		1,051		289		1,051		—		1,051		—
Total with an allowance recorded		9,655		5,658		1,340		6,933		—		7,909		—
Total	$	10,954	$	6,791	$	1,340	$	7,984	$	11	$	9,007	$	21

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2010:

	Unpaid Principal		Recorded
	Balance		Investment		ALLL Allocated
With no related allowance recorded:
Commercial	$	937	$	587	$	—
Real estate:
Single-family residential		461		142		—
Commercial:
Owner occupied		78		78		—
Land		695		700		—
Consumer:
Home equity lines of credit:
Originated for portfolio		138		138		—
Total with no allowance recorded		2,309		1,645		—
With an allowance recorded:
Commercial		2,035		1,636		332
Real estate:
Multi-family residential		3,996		3,985		1,296
Commercial:
Non-owner occupied		2,551		2,419		1,244
Owner occupied		1,055		1,053		32
Total with an allowance recorded		9,637		9,093		2,904
Total	$	11,946	$	10,738	$	2,904

	Three months			Six months
	ended			ended
	June 30,			June 30,
	2010		2010
Average of individually impaired loans during the period	$	10,932		$	12,062
Interest income recognized during impairment		12			15
Cash-basis interest income recognized		—			—

The following table presents the recorded investment in nonaccrual loans by class of loans:

	June 30, 2011		December 31, 2010
Loans past due over 90 days still on accrual:
Real estate:
Commercial:
Non-owner occupied	$	343	$	—
Nonaccrual loans:
Commercial		571		2,084
Real estate:
Single-family residential		708		266
Multi-family residential		3,070		3,986
Commercial:
Non-owner occupied		1,125		2,419
Owner occupied		1,051		1,131
Consumer:
Home equity lines of credit:
Originated for portfolio		135		161
Purchased for portfolio		149		—
Other consumer		—		10
Total nonaccrual loans		6,809		10,057
Total nonperforming loans	$	7,152	$	10,057

Nonaccrual loans include both smaller balance single-family mortgage and consumer loans that are collectively evaluated for impairment and individually classified impaired loans. There were no loans 90 days or more past due and still accruing interest at December 31, 2010.

The following table presents the aging of the recorded investment in past due loans as of June 30, 2011 by class of loans:

	30 - 59 Days		60 - 89 Days		Greater than 90				Loans Not Past		Nonaccrual Loans
	Past Due		Past Due		Days Past Due		Total Past Due		Due		Not Past Due
Commercial	$	—	$	—	$	84	$	84	$	32,943	$	487
Real estate:
Single-family residential		—		338		524		862		20,619		—
Multi-family residential		—		—		2,735		2,735		29,806		335
Commercial:
Non-owner occupied		598		55		1,393		2,046		36,369		75
Owner occupied		—		—		1,051		1,051		29,927		—
Land		—		—		—		—		5,635		—
Consumer:
Home equity lines of credit:
Originated for portfolio		135		—		—		135		12,682		—
Purchased for portfolio		28		74		149		251		3,004		—
Other		41		31		—		72		1,311		—
Total	$	802	$	498	$	5,936	$	7,236	$	172,296	$	897

The following table presents the aging of the recorded investment in past due loans as of December 31, 2010 by class of loans:

	30 - 59 Days		60 - 89 Days		Greater than 90				Loans Not Past		Nonaccrual Loans
	Past Due		Past Due		Days Past Due		Total Past Due		Due		Not Past Due
Commercial	$	449	$	—	$	—	$	449	$	37,745	$	1,635
Real estate:
Single-family residential		1,104		444		266		1,814		21,459		—
Multi-family residential		—		—		1,242		1,242		34,066		2,744
Commercial:
Non-owner occupied		1,188		—		2,419		3,607		36,687		—
Owner occupied		—		—		1,053		1,053		33,516		78
Land		—		—		—		—		5,862		—
Construction		—		—		—		—		4,919		—
Consumer:
Home equity lines of credit:
Originated for portfolio		1		54		—		55		12,850		161
Purchased for portfolio		—		—		—		—		3,411		—
Other		23		41		—		64		1,726		—
Total	$	2,765	$	539	$	4,980	$	8,284	$	192,241	$	4,618

Nonaccrual loans include loans that were modified and identified as troubled debt restructurings, where concessions had been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate, payment extensions, principal forgiveness, and other actions intended to maximize collection.

Nonaccrual troubled debt restructurings were as follows:

	June 30, 2011		December 31, 2010
Commercial	$	223	$	1,597
Real estate:
Single-family residential		—		142
Multi-family residential		2,294		2,744
Total	$	2,517	$	4,483

The Company allocated $541 and $714 of specific reserves to loans whose terms have been modified in troubled debt restructurings as of June 30, 2011 and December 31, 2010, respectively. The Company has not committed to lend additional amounts as of June 30, 2011 or December 31, 2010 to customers with outstanding loans that are classified as troubled debt restructurings.

Nonaccrual loans at both June 30, 2011 and December 31, 2010, do not include $839 in troubled debt restructurings where customers have established a sustained period of repayment performance, generally six months, loans are current according to their modified terms and repayment of the remaining contractual payments is expected. These loans are included in impaired loan totals.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Management analyzes loans individually by classifying the loans as to credit risk. This analysis includes commercial, commercial real estate, and multi-family loans. Groups of homogenous loans, such as single-family mortgage loans and consumer loans, are not risk-rated. This analysis is performed on an ongoing basis. The following definitions are used for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of CFBank’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that there will be some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, condition, and values, highly questionable and improbable.

Loans not meeting the criteria to be classified into one of the above categories are considered to be pass-rated loans. Loans listed as not rated are primarily groups of homogeneous loans. Past due information is the primary credit indicator for groups of homogenous loans. The recorded investment in loans by risk category and by class of loans as of June 30, 2011 and based on the most recent analysis performed follows. There were no loans rated doubtful at June 30, 2011.

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	520	$	24,955	$	3,482	$	4,070	$	33,027
Real estate:
Single-family residential		20,773		—		—		708		21,481
Multi-family residential		—		19,513		4,580		8,448		32,541
Commercial:
Non-owner occupied		393		26,776		3,813		7,433		38,415
Owner occupied		—		24,017		4,425		2,536		30,978
Land		961		1,232		—		3,442		5,635
Consumer:
Home equity lines of credit:
Originated for portfolio		12,682		—		—		135		12,817
Purchased for portfolio		2,307		—		799		149		3,255
Other		1,383		—		—		—		1,383
	$	39,019	$	96,493	$	17,099	$	26,921	$	179,532

The recorded investment in loans by risk category and by class of loans as of December 31, 2010 follows. There were no loans rated doubtful at December 31, 2010.

	Not Rated		Pass		Special Mention		Substandard		Total
Commercial	$	473	$	26,102	$	6,281	$	5,338	$	38,194
Real estate:
Single-family residential		23,007		—		—		266		23,273
Multi-family residential		—		21,021		4,529		9,758		35,308
Commercial:
Non-owner occupied		91		27,412		4,247		8,544		40,294
Owner occupied		499		27,253		5,090		1,727		34,569
Land		1,089		1,985		—		2,788		5,862
Construction		—		4,919		—		—		4,919
Consumer:
Home equity lines of credit:
Originated for portfolio		12,744		—		—		161		12,905
Purchased for portfolio		2,572		—		839		—		3,411
Other		1,780		—		—		10		1,790
	$	42,255	$	108,692	$	20,986	$	28,592	$	200,525

Management’s loan review process includes the identification of substandard loans where accrual of interest continues because the loans are under 90 days delinquent and/or the loans are well secured, a complete documentation review had been performed, and the loans are in the active process of being collected, but the loans exhibit some type of weakness that could lead to nonaccrual status in the future. At June 30, 2011, in addition to the nonperforming loans discussed previously, eleven commercial loans totaling $3,499, five multi-family residential real estate loans totaling $5,378 and sixteen commercial real estate loans totaling $10,892 were classified as substandard. At June 30, 2011, one of these loans, totaling $598 was less than 90 days delinquent and the remaining loans were current. At December 31, 2010, in addition to the nonperforming loans discussed previously, nine commercial loans totaling $3,250, six multi-family residential real estate loans totaling $5,781 and eight commercial real estate loans totaling $9,514 were classified as substandard. One of these loans, totaling $1,183 was delinquent at December 31, 2010 and the remaining loans were current.